Question
Free Cash Flows Rhodes Corporations financial statements are shown below. Rhodes Corporation: Income Statements for Year Ending December 31 (Millions of Dollars) 2020 2019 Sales
Free Cash Flows
Rhodes Corporations financial statements are shown below.
Rhodes Corporation: Income Statements for Year Ending December 31 (Millions of Dollars)
| 2020 | 2019 | ||||
| Sales | $ | 12,000 | $ | 11,000 | |
| Operating costs excluding depreciation | 10,668 | 9,726 | |||
| Depreciation and amortization | 360 | 350 | |||
| Earnings before interest and taxes | $ | 972 | $ | 924 | |
| Less interest | 220 | 200 | |||
| Pre-tax income | $ | 752 | $ | 724 | |
| Taxes (25%) | 188 | 181 | |||
| Net income available to common stockholders | $ | 564 | $ | 543 | |
| Common dividends | $ | 204 | $ | 200 | |
Rhodes Corporation: Balance Sheets as of December 31 (Millions of Dollars)
| 2020 | 2019 | ||||
| Assets | |||||
| Cash | $ | 650 | $ | 600 | |
| Short-term investments | 220 | 200 | |||
| Accounts receivable | 2,750 | 2,500 | |||
| Inventories | 1,550 | 1,400 | |||
| Total current assets | $ | 5,170 | $ | 4,700 | |
| Net plant and equipment | 3,750 | 3,500 | |||
| Total assets | $ | 8,920 | $ | 8,200 | |
| Liabilities and Equity | |||||
| Accounts payable | $ | 1,300 | $ | 1,200 | |
| Accruals | 650 | 600 | |||
| Notes payable | 194 | 100 | |||
| Total current liabilities | $ | 2144 | $ | 1,900 | |
| Long-term debt | 1,300 | 1,200 | |||
| Total liabilities | $ | 3,444 | 3,100 | ||
| Common stock | 4,316 | 4,300 | |||
| Retained earnings | 1,160 | 800 | |||
| Total common equity | $ | 5,476 | $ | 5,100 | |
| Total liabilities and equity | $ | 8,920 | $ | 8,200 | |
Suppose the federal-plus-state tax corporate tax is 25%. Answer the following questions.
- What is the net operating profit after taxes (NOPAT) for 2020? Enter your answer in millions. For example, an answer of $1 million should be entered as 1, not 1,000,000. Round your answer to the nearest whole number.
$ million
- What are the amounts of net operating working capital for both years? Enter your answers in millions. For example, an answer of $1 million should be entered as 1, not 1,000,000. Round your answers to the nearest whole number.
2020: $ million
2019: $ million
- What are the amounts of total net operating capital for both years? Enter your answers in millions. For example, an answer of $1 million should be entered as 1, not 1,000,000. Round your answers to the nearest whole number.
2020: $ million
2019: $ million
- What is the free cash flow for 2020? Enter your answer in millions. For example, an answer of $1 million should be entered as 1, not 1,000,000. Cash outflow, if any, should be indicated by a minus sign. Round your answer to the nearest whole number.
$ million
- What is the ROIC for 2020? Round your answer to two decimal places.
%
- How much of the FCF did Rhodes use for each of the following purposes: after-tax interest, net debt repayments, dividends, net stock repurchases, and net purchases of short-term investments? (Hint:Remember that a net use can be negative.) Enter your answers in millions. For example, an answer of $1 million should be entered as 1, not 1,000,000. Round your answers to the nearest whole number.
| After-tax interest payment | $ million |
| Reduction (increase) in debt | $ million |
| Payment of dividends | $ million |
| Repurchase (Issue) stock | $ million |
| Purchase (Sale) of short-term investments | $ million |
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